Europe’s ink producers are facing long-term hikes in pigment prices as a result of the restructuring of the supply chain in both their domestic sector and in Asia. The main driving force behind the increasing prices will be the enforcement of stricter environmental regulation, not just in Europe but in Asia, particularly China.

With organic pigments, a more severe implementation of environmental rules is resulting in plant closures or cuts in production capacities in Asia for both the pigments themselves and their intermediates.

Prices of organic pigments in Europe, which is heavily dependent on Asia producers, went up by a few percentage points in the first half of this year, and is likely to rise by a similar proportion in the second half.

These relatively small but persistent increases will probably be a permanent phenomenon over several years as the governments of Asian countries making bulk pigments and their intermediates embark on rigorous programs of reducing industrial pollution. They will be responding to the pressures from the expanding middle classes in their countries who want a higher standard of living with a less contaminated environment.

“Prices rises are inevitable,” said Phillip Myles, director and general manager of Union Colours, Stockport, UK, the international branch of Longyu Pigment and Chemical Corp., one of the largest organic pigment producers in China.

“There is likely to be fewer suppliers in countries like China as a result of producers being unable to comply with stricter regulations,” he continued. “Those remaining in the market will have been investing in efficient water treatment plants whose costs will have to be passed on.”

China and the Environment

The biggest impact on the pigments market from the global tightening of environmental regulations continues to be in China, due to its position as the world production center for organic pigments and their intermediates.

While it accounts for 50% to 55% of the output of azo pigments, it is also responsible for around three quarters of the output of the intermediates for these products, according to industry sources.

The myriad SMEs in China making intermediates and pigments are particularly vulnerable to the effects of the recent decision by the Chinese government to step up its drive to raise environmental standards in manufacturing industries. Prime minister Li Kequiang said in March this year that China had reached a stage where it had to “declare war” against pollution.

Commentators believe that the government is being forced to take tougher action on the environment because of growing discontent among its own citizens, especially in its rapidly expanding cities, about the rising levels of contamination of air and water.

Under new environmental rules, polluters face much stiffer fines or even imprisonment. Officials in local municipalities and environmental protection agencies can be sent to jail for turning a blind eye to breaches of anti-pollution laws.

Local citizen groups will be able to take legal action to ensure that environmental restrictions in their areas are enforced.

Municipalities and companies will also have to disclose pollution data with the aim of making information about environmental protection much more transparent.

The government is likely to increase expenditures on the enforcement of environmental regulations, particularly by raising staffing numbers in the country’s network of undermanned local environmental inspectors.
China’s per capita spending on environmental protection, amounting to $0.40 in 2012, is far lower than in developed countries. In the U.S., for example, it is $25 per year.

“Pigments and intermediates producers in China with inadequate water treatment facilities now have to do something to comply with the stricter regulations,” explained Myles. “They can close production capacity or reduce output to ensure that the effluents from their plant keeps within the legal limits, or they can invest in improved water treatment equipment.”

The Impact of REACH

In Europe, REACH, the European Union’s seven-year-old legislation for the registration, evaluation and authorisation of industrial chemicals, is beginning to reshape the European pigments market.

The legislation requires that approximately 30,000 substances are registered with safety profiles in stages over an 11-year period ending in 2018. It is now at a point where most pigments have either just been registered or their registration dossiers are being prepared, in what can be an expensive and laborious process often necessitating the collection of a lot of safety data.

It can be particularly costly with classes of pigments whose substances can be potentially hazardous, such as azo pigments or those with a high metallic content.

With some pigments, REACH can require higher purity levels than were previously necessary, which can increase production costs. Hence, some printing ink pigments are having to be marketed in Europe with fewer impurities than is required elsewhere in the world.

REACH has become a burden for importers of some printing ink and other pigments who do not have the funds or regulatory expertise to comply with the legislation. As a result, some distributors have been pulling out of certain pigment markets.

“The gaps left in the markets by these distributors are now in some cases being filled by rather unscrupulous traders,” said a commercial manager of one printing ink pigments supplier. “They are taking advantage of the weak enforcement of REACH in some EU countries by selling pigments which breach the rules of the legislation on registration or impurity levels. These traders are attracted to the market for imported pigments by the shortages and steadily rising prices.”

Even when pigments substances have been registered under REACH, their producers and importers can still face other hurdles before the marketing of them in the EU is fully approved. The biggest of these is for some potentially dangerous chemicals, categorized by the Helsinki-based European Chemicals Agency (ECHA) responsible for administering REACH, as substances of very high concern (SVHC).

These have to go through an additional procedure of authorization, involving the provision of more detailed data. This can include social and economic reasons why a product should be allowed to stay on the market and evidence of why it should not be replaced by a safer alternative.

REACH has helped accelerate trends towards greater consolidation among suppliers of organic pigments for inks in Europe. But the main driver behind this restructuring continues to be the high proportion of imported pigments from low cost producers in Asia, predominantly China and India.

BASF announced last year it would be closing its organic pigments plant at Paisley, Scotland, which it acquired after its takeover of Ciba Speciality Chemicals of Switzerland six years ago. Under Ciba’s ownership, the facility had been one of Europe’s largest sites for making classical printing ink pigments.

The plant was said by BASF to be no longer cost competitive at a time when the company was restructuring its global pigments operations. Furthermore, azo pigments, which was one of the plant’s main products, was considered by the company now to be part of a shrinking market.

Clariant, another European-based chemicals multinational which historically has been a major international producer of printing ink and other pigments, is remaining committed to the bulk pigments sectors, but it is now intent on making these in Asia rather than Europe.

“Our future lies in Asia,” said Christian Kohlpainter, member of Clariant’s executive committee responsible for the company’s pigments, additives and masterbatches operation, after the company announced in September last year its acquisition of the organic pigments business of Jiangsu Multicolor Fine Chemical Co. Ltd. (JMC), Jiangsu, China, which supplies both the domestic and export markets.

Clariant has also revealed plans to build at JMC’s site at Zhenjiang a world-scale PV 23 plant, which is due to be opened in 2016. These investments would support the “efforts (of Chinese customers) to achieve greater cost efficiency (and) improved environmental performance,” said Kohlpainter.

In Europe’s inorganic pigments sector, the speciality titanium dioxide segment which provides TiO2 for printing inks is set to be reorganized after Huntsman Corp. agreed to take over for $1.3 billion the German-based Sachtleben TiO2 business of Rockwood Holdings.

With sales of more than $1 billion and profit margins of more than 30% around four to five years ago, the Sachtleben operation had been a highly successful business for U.S.-based Rockwood. But when costs of titanium and other raw materials rose and demand faltered, profits began to plummet so that by mid-2013 it was taking a loss.

The takeover is being investigated by the European Commission to ensure that it does not breach EU competition rules. The Commission, which has to reach a decision by July 22, explained in a statement that it was concerned about applications “using sulphate-based titanium dioxide where Huntsman and Sachtleben are the two leading suppliers worldwide and compete closely.”

With so many pigments running into problems with production costs and environmental issues, there is more R&D activity among the larger pigment producers as well as start-ups, in the development of alternatives to conventional products. Over the last few decades, there have been few big breakthroughs in the chemistry for organic pigments.

Most of the research efforts have been focused on the higher end of the market, where one strategy has been to introduce environmentally cleaner and more sustainable pigments.

Clariant has started incorporating renewable raw materials, based on bio-succinic acid, into quinacridone pigments made at its Frankfurt-Hoechst facility in Germany. It has also been eliminating or reducing to low levels the halogen content of pigments.

There are more radical R&D initiatives aimed at moving away from reliance on pigments through photonic technologies like structural colorants. These generate different colours through the reflection and refraction of light on different surfaces.

LumeJet, Coventry, England, a spin-off of neighbouring Warwick University, has been targeting the burgeoning photobook segment with a photonic technology that beams light through a digital print head onto paper coated with three silver halide layers for emitting red, green and blue.

One objective of its R&D program is to switch to a printing process using photochromic light-activated inks, which could be applied in the packaging sector.

Even if any of these emerging technologies are successful, it will be many years before they are used widely in the European printing market. “The present supply chain with a large proportion of printing ink pigments and their intermediates being exported out of Asia into Europe will be with us for some time,” said Miles.

European Editor Sean Milmo is an Essex, UK-based writer specializing in coverage of the chemical industry.